New York Fed: ‘No One Is Happy About Owning a Mall’

As a side-effect of Bear Stearns’ bailout, the New York Fed took over a gargantuan mortgage portfolio. Two years later, it’s leaving some Fed officials with a rather unfamiliar dilemma: Working with local sheriffs, they may have to foreclose on some delinquent properties around the country. And their recently-secretive collection includes something like 9,000 residential loans. “If the Fed can’t figure out how to recast the terms of these mortgages and work with borrowers—it’s emblematic of the problems the government has had with other programs over the last year and a half,” former senior Fed staffer Vincent Reinhart complained to the Journal.

The Fed branch already foreclosed on one property, the Crossroads Mall in Oklahoma City. According to its website, the 1.2-million-square-foot, two-hotel, 16-theater mall has 60 specialty shops and eateries, a children’s play area, the town’s only indoor full-size carousel, and is “easily accessible from all parts of the metropolitan area.” But tenants like Dillard’s have left, and the government is having a lot of trouble trying to sell it off.

“No one is happy about owning a mall,” said Helen Mucciolo, a New York Fed official who heads a team that manages the troubled portfolio. “But we have to manage this responsibly and see what we get back.” On the upside, this Friday, Saturday and Sunday will be the annual sales tax holiday in Oklahoma. Crossroads mall plans to participate.

The Fed also owns loans on properties as far afield as Hawaii and Malaysia. Mr. Reinhart imagines how Fed chairman Ben Bernanke must feel: “You should have the image of Chairman Ben Bernanke flying to a speaking engagement,” he told NPR. “And he can look out the window and look down and say, ‘Boy, I own a piece of that, I own a piece of that, I own a piece of that.'”